Weekly Update - A Summary Of Recent Developments In Insurance, Reinsurance And Litigation Law 36/10

CONTENTS

Fearns v Anglo-Dutch & Ors

A case on the appropriate date of conversion into a common currency of cross-claims in different currencies

Giedo Van Der Garde v Force India Formula One Team

A case on whether a prior gentleman's agreement is admissible as evidence to construe a later written agreement

This Week's Caselaw

Fearns v Anglo-Dutch & Ors Appropriate date of conversion of cross-claims in different currencies

http://www.bailii.org/cgibin/markup.cgi?doc=/ew/cases/EWHC/Ch/2010/2366.html&query=Fearns&method=boolean

Equitable set-off arises where a cross-claim is so closely connected with the claim that it would be manifestly unjust to allow the claimant to enforce payment without taking into account the cross-claim. At trial, the judge ordered equitable set-off in this case. However, the damages payable to the claimant were in sterling and the debt payable by the defendant to the claimant was in euros. Accordingly, an issue arose as to when the amounts should be converted into a common currency. Was it (1) when the claim first arose or (2) the date of the judgment? The issue was of importance in this case because the rate of exchange between sterling and the euro had altered significantly between these two dates in this case.

The judge (Mr G Leggatt QC) found as follows:

Equitable set-off is not simply a procedural defence, it also affects substantive rights. However, neither the existence nor the exercise of a right of equitable set-off has the effect of extinguishing or reducing the liability of either party to the other; The earliest date at which a set-off is possible is when the existence and the amount of the two liabilities is finally determined by judgment or agreement; The correct approach of the court when ordering a set-off between amounts payable in different currencies is as follows: (a) assess and add to each principal amount any interest accruing up to the date of the set-off; (b) convert the smaller amount into the currency of the larger amount at the exchange rate prevailing at that date; and (c) order payment of the balance; In this case, the claimant would only have made an additional loss from currency fluctuations if he would have used the profits of which he was deprived to pay off his debt at an earlier date. However, on the facts, it was shown that he would not have done this; and An issue arose as to whether the costs which the claimant had been ordered to pay to the defendant could be set-off against the...